Brush Grocery Kart, Inc. v. Sure Fine Market, Inc.

Facts

In October 1992, Brush Grocery Kart, Inc. and Sure Fine Market, Inc. signed a five-year "Lease with Renewal Provisions and Option to Purchase" for real property, including a building Brush ran as a grocery store. In the last six months of the lease, Brush could elect to buy the property at a price equal to the average of the appraisals of an expert designated by each party. Shortly before the lease expired, Brush told Sure Fine it wanted to buy. Each side offered an appraisal, but they could not agree on a price by the time the lease ended. Brush then vacated, returned all keys, and said it would discontinue the casualty insurance it had carried during the lease. Brush sued, alleging that Sure Fine failed to negotiate the price in good faith. Sure Fine counterclaimed that Brush negotiated in bad faith. During the litigation, a hail storm substantially damaged the property. Neither party carried casualty insurance, and each said the other was liable. The loss was added to the case at a stipulated amount of $60,000. The record indicated that Sure Fine considered itself to hold the right of use and occupancy and said it would treat Brush as a holdover tenant if Brush stayed on other than by continuing to lease.

Issues

1. Does a Colorado statute on a vendor's inability to convey part of the property assign the risk of casualty loss during the executory period of a contract for the sale of real property?
2. Does equitable conversion alone place the risk of no-fault casualty loss on a buyer who has contracted to buy real property but has no right of possession?
3. If the buyer does not bear the loss, what remedy does the buyer have?

Holding

Brush was not an equitable owner in possession when the hail storm hit, so it did not bear the loss. It could rescind. At least under the circumstances of this case, where it chose to go forward under a stipulation on the loss, it was also entitled to specific performance with a price abatement equal to the casualty loss.